Pharma companies determine what patients buy
In an ideal market economy competition lowers prices of consumer goods. It is just the opposite in the case of pharmaceutical products. More expensive brands sell more.
Take Cyclovir, an ointment for treating skin infection caused by herpes. Its therapy cost (cost of one course) is Rs 812, while a similar drug, Herpex, costs Rs 1,666. Both brands, marketed by different pharma companies, have the same salt—acyclovir. Yet the annual sale of the costlier Herpex brand was worth Rs 3.17 crore while that of Cyclovir was just Rs 57 lakh.
An analysis of India’s National List of Essential Medicines confirms that the brands that sell the most in the country are not necessarily cost effective. Of the top selling 300 drug brands that account for annual sales worth Rs 19,000 crore, only 115 brands, covering 68 drugs, are in the essential list, according to ORG-AC Nielsen, a market research agency. This means most brands are the ones which are neither essential nor cost effective. What’s more, many drugs in the essential list, totalling 364, are not covered by the government’s price control order. Cifran (Ciprofloxacin), an antibiotic manufactured by Ranbaxy and included in the essential drugs list, costs Rs 9 a tablet. Its cheaper version costs Rs 2 but does not sell much.
Doctors and junkets
Expensive drugs ride on aggressive promotional campaigns by pharma companies who offer incentives to doctors. Recently, a company that markets epoetin alfa for treating kidney malfunction, sponsored some 300 doctors and their spouses who attended a three-hour workshop in Singapore with an extended three-day stay thrown in. The company brand has the highest sale, said C M Gulhati, editor of Monthly Index of Medical Specialities (MIMS), a journal published from Delhi. Gopal Dabade, activist with non-profit Drugs Action Forum in Karnataka, said it is hard to break the nexus between pharma firms and doctors. “The Medical Council of India’s blanket ban on doctors accepting gifts, travel sops and hospitality from pharma companies in lieu of promoting their products has not seen the light of the day,” he said. “As for prescription audits (to prevent doctors from prescribing expensive drugs), the question is who will keep an eye on private doctors?” he asked.
The crumbling public health system ensures over 80 per cent patients approach private practitioners, said Gulhati. Since controls on private doctors are few, many prescribe expensive drugs that drain people’s resources. Even government doctors prefer branded drugs over generic ones.
Price regulations don’t work
Studies show healthcare is the second leading cause of rural indebtedness in India, after dowry. Government intervention is a must to break this debt cycle, said health activists. “Given that the consumer has no choice and the decision to buy medicines is taken by the doctor, it is government’s responsibility to care for patients,” said Jyoti Mirdha, member of Parliament from Nagaur in Rajasthan. She had recently raised questions in Parliament on medicines becoming unaffordable. She said the Union ministries for chemicals and fertilizers (MoCF) and health and family welfare, should work together to reduce prices of drugs (see: The way out).
Lack of coordination between the two ministries is a major reason for the drug price spiral. The National Pharmaceutical Pricing Authority (NPPA), which controls and monitors prices of drugs, is under MoCF while the Drug Controller General of India who approves the drugs for sale reports to the health ministry. The NPPA controls the prices of schedule-1 drugs through the Drug Price Control Order that lists 74 drugs. Over time, many drugs have been removed from this list and the drug controller has been approving expensive drugs in their place.
The price control is limited to the reference molecule (basic salt molecule) in a drug. “The pharma manufacturers tweak the reference molecule to escape the price control order. They then take approval from the drugs controller and sell the new drugs at a higher price,” explained Pratibha Siva, a legal activist with the Lawyers Collective, an advocacy group. This way, many price controlled drugs have vanished from the market and are being replaced by more expensive drugs as seen in the case of the anti-asthmatic drug Theophylline that used to cost Rs 3 for 10 tablets, said an activist. It was replaced with Doxophylline, priced between Rs 45 and Rs 83. Result: consumers had to pay 25 times more for the same drug. Gulhati said the government can check this practice by regulating profits on compounds of the same class.
For drugs outside the government schedule, the manufacturers are not allowed to raise the price by more than 10 per cent of the marked price every year. This is hardly a deterrent as initial base price is never reviewed and kept very high and the 10 per cent annual increase is a bonus, said Gulhati.
Health experts said both the price control order under MoCF and the list of essential drugs maintained by the health ministry need to be revised regularly to make public healthcare affordable. Instead of strengthening the price control system, the government has been diluting it every few years. In 2002 it tried to reduce the number of drugs under price control from 74 to 34, under pressure from the pharma lobby. The Supreme Court stayed this and asked the government to first decide the basket of essential medicines to be kept under price regulation and determine the methodology for it. In 1970, about 90 per cent of the drugs had regulated prices. Now it is 10 per cent. Many times price controlled drugs, too, are sold at prices higher than the marked price.
An MoCF official said an inter-ministerial high powered committee has been set up to recommend a framework for ensuring quality drugs at affordable prices. The panel will submit its report next year. MoCF had earlier proposed to bring drugs in the essential medicines list under drug price control in the draft pharma policy of 2006. The policy was put in cold storage after it was submitted to the group of ministers headed by agriculture minister Sharad Pawar.
Capping profit margins of the pharma companies can also help reduce the drug prices. “Otherwise pharma firms will find ways to stay out of price control and keep prices high,” Mirdha said. Chinu Srinivasan, of Low Cost Standard Therapeutics (LOCOST), a nonprofit and small-scale pharma in Vadodara, said an essential drugs policy should be in place to make low-cost drugs available to the public.
Let market decide prices: pharmas
People from the pharma industry insisted there is no need to control drug prices. “If prices are the deterrent then why is it that 80 per cent of Indian women are anaemic when iron tablets cost less than one rupee?” asked Ranga Iyer, former president of Organisation of Pharmaceutical Producers of India (OPPI). He cited another example: “HIV drugs, provided free, have reached only10 per cent of the affected.”
Pharma companies opposed any cap on their profits. “It would send a negative signal to investors seeking to fund new medicines,” said Mark Grayson, spokesperson for Pharmaceutical Research and Manufacturers of America, which has Pfizer and Merck, among others, on board. He said even with patents, eight out of 10 drugs do not earn enough money to support the cost of development, much less earn profit.
Ranjit Shahani, president of OPPI, said India has over 7,000 drug companies selling more than 27,000 brands of drugs. The competition will regulate the price, he said.The pharma companies have a lot to gain by maintaining status quo. The consumption of pharma products in India is projected at Rs 96,000 crore in 2015 against present consumption of Rs 61,440 crore.